Currency supply to banks improves in 2017

Malini BhuptaMoneycontrolLiquidity conditions are improving by the day as is the availability of currency notes in denominations of Rs 500 and Rs 100. The Reserve Bank of India is releasing a lot more cash to banks than was the case in November and mid-December. Large private and public sector banks are now receiving close to Rs 45-60 crore per day to meet cash disbursal requirements from the central bank claim sources in banking circles.

In January, most large banks received Rs 60 crore per day in Delhi, while the amount was between Rs 35-45 crore in Mumbai. Banks claimed they were receiving about Rs 15 crore in Kolkata and about Rs 20 crore in Chandigarh.

Even though the situation has improved compared to November and early December, banking sources claim the daily supply of currency was to the tune of Rs 150 crore for each bank in large metros prior to demonetisation, Currency supply had dropped to less than Rs 10 crore per day for most banks across key metros. But with supply of notes increasing, the daily supply of currency has now inched up to Rs 55 crore per day in key cities like Mumbai, Delhi and Kolkata. And 90% of this cash is now in denomination of Rs 500. Said one official with a leading bank: "The availability of funds has improved from levels seen in November and we expect things to get even better by the end of this month."  

The government has continued to retain currency withdrawal limits even after December 30, as supply of fresh currency has not been adequate to meet demand. While the weekly withdrawal limit of Rs 24,000 for individuals remains, cash withdrawals from ATMs has been increased to Rs 4500 from January 1. For small businesses the withdrawal limit is set at Rs 50,000 per week.

Sources within leading banks claimed the availability of cash had improved and that in Mumbai most large banks were getting up to Rs 50 crore a day, which was then distributed to their branches. Allocation of cash is largely decided by the central bank depending on the branch network of the bank, currency chests and specific requirements. An email to Rserve Bank of India in this regard remained unaswered.

Even though the government has stated that remonetisation was well under way and that the situation would improve significantly in the coming days, reality on the ground was markedly different. On Monday State Bank of India chairman Arundhuti Bhattacharya said that of the Rs 14.5 lakh crore currency which had been invalidated, Rs 850,000 crore fresh currency had been pumped back into the system. However, cash crunch continued to plague customers as currency notes in lower denomination (namely Rs 500) was still not available in adequate quantities. But with improved availability, the supply has also increased substantially. However, banks do not expect the supply of cash to reach pre-demonetisation levels just yet.